Rare earth elements, despite their abundance in nature, have become a critical battleground in the escalating economic and political rivalry between the United States and China.
As Donald Trump prepares to assume office in January, trade policies under his administration are expected to reshape the dynamics of this strategically important market.
Rare earths, indispensable to industries from defence to clean energy, could be subject to heightened restrictions and retaliatory measures, further destabilising global supply chains.
The United States has been grappling with its dependence on China, which dominates approximately 70% of rare earth production and 90% of processing capabilities worldwide.
These 17 elements, including neodymium, dysprosium, and terbium, are essential for manufacturing technologies like electric vehicles, wind turbines, and advanced defence systems.
Establishing alternative supply chains has proven to be a lengthy and costly endeavour, leaving the US and its allies vulnerable to disruptions.
China’s strategic hold
China’s supremacy in the rare earths industry stems not only from its vast reserves but also from its strategic policies.
Government subsidies, economies of scale, and significant stockpiling have enabled Beijing to offer rare earth materials at prices that undercut global competitors.
In 2023, the Chinese government escalated its grip by restricting exports of gallium and germanium, a move perceived as a response to US sanctions on semiconductor technology.
Moreover, China has declared rare earths a state asset and banned the export of certain extraction and separation technologies, reinforcing its leverage in global trade disputes.
The potential for Beijing to weaponise its rare earth dominance remains a pressing concern, especially given its past use of export restrictions during geopolitical tensions, such as the 2010 maritime dispute with Japan.
Efforts to challenge China’s monopoly have gained momentum, with projects in the US, Canada, and Australia aiming to reduce dependence.
These initiatives face significant hurdles.
Rare earth mining and processing are resource-intensive and environmentally taxing, often involving hazardous by-products like uranium and thorium.
The high costs and lengthy timelines required to develop facilities have deterred many investors, further entrenching China’s position.
US faces uphill battle
In the face of mounting threats to supply chain stability, Washington has prioritised building a sustainable rare earth pipeline.
Initiatives like the reopening of the Mountain Pass mine in California and investments exceeding $440 million in rare earth projects signify progress.
Yet, the US remains far from achieving self-sufficiency.
Analysts estimate that 99% of heavy rare earth processing still takes place in China, underscoring the challenges of establishing an independent supply chain.
Global efforts to diversify rare earth sourcing have been met with mixed success.
Brazil’s first rare earth mine became operational in January 2024, and Europe has made strides with processing facilities in France and Germany.
Environmental concerns and regulatory barriers have slowed development in key regions like Sweden and Norway.
Trump’s potential policies could add another layer of complexity.
His track record suggests a focus on reducing regulatory obstacles to mining, but analysts warn that his inclination towards imposing tariffs might exacerbate supply chain disruptions.
Tariffs could raise costs for US manufacturers reliant on imported rare earth materials, further straining industries already grappling with economic uncertainty.
As the rare earth industry navigates this precarious landscape, a coordinated approach between governments and private sectors will be essential.
Investing in recycling technologies and circular economies could provide a sustainable alternative to reliance on mined resources.
These solutions require time, leaving the global economy exposed to potential shocks in the interim.
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